Asian Stocks Decline as U.S. Mired in Debt Stalemate

Oct. 14 (Bloomberg) -- Asian stocks fell, with a regional
gauge retreating from a four-month high, as American lawmakers
struggled over an accord to raise the U.S. debt limit and
restore government operations.

The MSCI Asia Pacific excluding Japan Index dropped 0.3
percent to 471.15 as of 3:17 p.m. in Singapore, with more than
two shares falling for each that rose. Markets in Tokyo and Hong
Kong are shut for holidays. With the U.S. borrowing authority
set to lapse Oct. 17, Senate leaders in Washington sought a pact
to avert a default and re-open the government.

“It’s a situation no one wants to be in, causing market
volatility,” said Angus Gluskie, managing director at White
Funds Management Ltd., where he helps oversee about $550 million
“The two political parties do need to reach an agreement. If
there’s no deal by Thursday, markets will fall further.
Investors are getting a little bit concerned on China after
seeing a couple of weak data points.”

Singapore’s Straits Times Index dropped 0.6 percent. The
nation’s economy shrank an annualized 1 percent in the three
months through September from the previous quarter, when it
expanded a revised 16.9 percent, the Trade Ministry said in a
statement today. The median forecast in a Bloomberg News survey
of 13 economists was for a 4 percent contraction.

China’s Shanghai Composite Index gained 0.4 percent. The
nation’s consumer prices rose 3.1 percent in September from a
year earlier. That exceeded the 2.8 percent median estimate of
44 analysts surveyed by Bloomberg News and compared with a 2.6
percent gain in August.

The MSCI Asia Pacific Index, which includes Japan, climbed
1.3 percent last week amid optimism U.S. lawmakers were moving
closer to resolving the debt impasse. The gauge traded at 13.6
times estimated earnings on Oct. 11, compared with 15.4 for the
Standard & Poor’s 500 Index and 14.3 for the Stoxx Europe 600
Index.

Reid Confident

S&P 500 futures fell 0.8 percent. Reid said he’s “in
conversation” with McConnell and is “confident” Republicans
will agree to end the partial government shutdown and raise the
debt ceiling. McConnell said in a statement that it’s time for
Democrats to support a plan, based on one drafted by Republican
Susan Collins, which Reid rejected Oct. 12.

The talks are shifting away from Republican efforts to
curtail Obama’s signature health-care law to rescinding a tax on
medical devices to focus on the level of spending and the
duration of the deficit-ceiling extension.

Obama, in a phone call with House Minority Leader Nancy
Pelosi of California, “reinforced that there must be a clean
debt limit increase” -- and a stopgap spending measure also
free of policy add-ons -- before budget negotiations can begin,
according to a White House statement.

‘Nervous Market’

“The market fully expects a deal to be done, but they are
going to be nervous until it’s confirmed,” Matt McCormick, who
helps oversee $10.1 billion as a portfolio manager at
Cincinnati, Ohio-based Bahl & Gaynor Inc., said by phone. “It
will be jittery until it happens. A jittery, nervous market will
blow up when it is finally resolved. Then it will trend back
down.”